The biggest risk to Bitcoin is people not using Bitcoin. If nobody is using Bitcoin for daily transactions, then miners have no continued long-term incentive to keep mining. As soon a different proof of work cryptocurrency starts gaining enormous traction for actual real-world day-to-day peer-to-peer transactions on the scale of Visa and Mastercard, then miners will switch instantly.
The risk is real because BTC is currently not used in any mentionable degree for on-chain payments. Most transaction are either custodial or speculative holding. Bitcoin turned into a settlement layer for few large-value transactions and what is described as store of “value”.
But Bitcoin needs daily transactions in order to make long-term financial sense to miners. Miners invest massive compute power for mining Bitcoins, and by doing so they secure the network. For this effort, they are currently rewarded 3.125 BTC per block or 450 BTC per day. The problem is that this effort – and thus Bitcoin’s security – is massively “subsidized” by block rewards (newly minted BTC). Theoretically, miners would also be rewarded by transaction fee revenue. But transaction fees were only 3.53 BTC over the past 24 hours. In other words, <1% of miner revenue is currently funded through transactions and >99% is funded through block subsidies.
The next halvings in 2028 and 2032 will further reduce subsidy issuance by 50% each time. This puts pressure on Bitcoin because in order for miners to continue mining, the BTC price must appreciate substantially and/or on-chain demand for transactions must rise significantly in order to offset these subsidy halvings. The only way for this to happen is either the mass-adoption of a layer 2 solution like Lightning or Ark and/or that Bitcoin captures 1-5% of the global payment markets in interbank settlements, ETFs, and nation states. This would allow fees to hit 20-50% and thereby offset the 2032 subsidy halving. The only alternative – as long transactions and thereby transaction fees stagnate – is that BTC is crossing >$1M by 2032.
Leaving speculation aside, either way, by 2140 Bitcoin’s security MUST come from transaction fees alone. If transaction volume stays low then long before 2140 the fee revenue will be inadequate to maintain hash power to secure the network against 51% attacks.
Bitcoin miners use ASICs, which are specialized chips for computing SHA-256 hashes. Miners already practice “hash rate migration” which means they point their ASICs at whatever SHA-256 blockchain is most profitable to mine at any given moment. This is the rare exception but – in other words – if any other SHA-256 coin genuinely became more valuable (for example by actually being used as a global on-chain P2P cash system) and thereby more profitable to mine than Bitcoin, that hardware will absolutely migrate to whatever that coin will be.
My Conclusio: Technically, BTC is too limited to be functional as a P2P cash system, and thus Bitcoin in its current form can not capture the global P2P transaction market. Ergo: the most important use case for cryptocurrencies – that of a global mass-adopted day-to-day P2P cash system – is not yet claimed by any cryptocurrency in the market.